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Western Professionals ‘Enabling Transnational Kleptocracy: Report

In this Wednesday, June 6, 2018 photo, billboards advertise luxury villas and apartments in Dubai, United Arab Emirates. A new report released Tuesday, June 12, 2018, by the Washington-based Center for Advanced Defense Studies, relying on leaked property data from the city-state, described Dubai’s real-estate market as a haven for money launderers, terror financiers and drug traffickers sanctioned by the U.S. in recent years. Officials in Dubai said they could not comment on the report. (AP Photo/Kamran Jebreili)

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Western Professionals ‘Enabling Transnational Kleptocracy: Report

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The report identifies six service sectors, that plays an intermediary role in facilitating illicit activities, including the fintech and cryptocurrency, legal, incorporation, financial, real estate, lobbying, and public relations services.

WASHINGTON DC —

A new report by the U.S. think tank has accused western experts of enabling authoritarian and kleptocratic leaders to launder and expropriate state funds.

“When you are sitting in a lawyer’s office to review anonymous and empty cash with no identities apart from the digits, these financial flows are coming from, to a large extent, from authoritarian states and are coming from states which are deeply corrupted with the agenda to strengthen their authoritarianism,” said Ben Judah, a research fellow at the Hudson Institute and a co-author of the report.

The report identifies six service sectors, that plays an intermediary role in facilitating illicit activities, including the fintech and cryptocurrency, legal, incorporation, financial, real estate, lobbying, and public relations services.

“The key element here permitting this is that the way that the financial and legal system is currently constituted permits authoritarian kleptocrats the possibility and amenity within the western financial system, particularly the United States,” added Judah.

Some of the top leaders of Asian, Eastern European and African governments, such as former Ukrainian Prime Minister Pavlo Lazarenko, former president of Taiwan Chen Shui-bian, and current vice president of Equatorial Guinea Teodoro Nguema Obiang Mangue, accessed legal services in the United States to channel their illicit funds, according to the report.

The report also reveals that some kleptocrats, such as Egyptian dictator Hosni Mubarak and Venezuelan President Nicolas Maduro, engage lobbying and public relations services in the United States to whitewash their reputation and attempt to influence policymaking in Washington D.C.

Elise Bean, a former staff director and chief counsel on the US Senate Homeland Security and Government Affairs Committee’s Permanent Subcommittee on Investigations, told VOA Khmer that these transactions affected U.S national security as some financial professionals accepted clients who are the subject of official sanctions.

“One of the investigations [that] we did showed that HSBC, a global bank, was actually opening up accounts for North Korea even though they are on a sanctions list. That’s a problem we need to stop,” Bean said.

Poor policing of the financial system, including a lack of dedicated units and strong penalties for financial crimes, has facilitated the influx of illicit money of authoritarian regimes into the United States, according to the report.

“What we are arguing in this report is that a lack of legislation placed on these professional communities has turned them into the enablers of the strengthening of the authoritarian kleptocracy within the west,” said Judah. “Without effective reform, there is a feedback loop based on a money laundering nexus which is turning American lawyers, lobbyists, and bankers into the enablers of authoritarian influence.”

Max Hays, anti-money laundering campaign leader at Global Witness, who also spoke at the report launch, agreed with Judah. Hays told VOA Khmer after the event that he disagreed with the anti-regulatory sentiment that enables these professionals to provide these types of services to kleptocrats.

“I think we would disagree with [the anti-regulation] notion. In fact, this [regulation] is a very efficient and effective way to inject transparency into the financial system in a way that imposes a minimum burden," he added.

Elise Bean suggested that to tackle the problem service providers should have anti-money laundering obligations and corporate transparency and that better beneficial ownership information should be available.

“One, they should pass the legislation to acquire greater corporate transparency, so you know who the beneficial owners are. The second one, they should eliminate the exemption to the Bank Secrecy Act,” she said.